UAL: Margins Under Pressure

United Continental (UAL) faces margin pressure going forward into 2013 if it doesn’t do something about the pricing of airfares. The airline has seen fuel costs increase +8% year-over-year to $3.44/gallon for September of 2012 as well as a +6.5% increase in salary plus related costs year-over-year for Q2 2012. UAL has yet to pass many of these costs on to the consumer via ticket prices, which will ultimately put pressure on 2013 EPS estimates. With UAL facing a more competitive American Airlines, you can see why our Industrials coverage remains bearish on UAL.

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